In the era of health care reform, an increasing number of U.S. hospitals and physician practices are consolidating. The burning question is how this trend has affected the cost of care?

The Medica Research Institute recently published research in Health Economics showing that these business deals raise physician prices.

Previous studies have solely focused on the impact of hospital market concentration, and there have been few scientific findings on physician market concentration.
When a clinic system is acquired by an integrated delivery system, the ownership change involves both vertical integration with the hospital(s) and horizontal integration with the IDS' previously-owned legacy clinics.

The research team decided to investigate how physician prices were affected when two IDSs acquired three multispecialty clinic systems in Minneapolis and St. Paul in 2007.

Commercial claims data from Medica health plans from 2006 to 2011 were used to track prices.

The team found that four years after the acquisition, average physician prices in the acquired clinic systems were 32 to 47 percent higher than what would be expected if they weren't acquired.

They also found that average physician practices in the IDS legacy clinics were 14 to 20 percent higher than expected.

The study author, Caroline Carlin, stated that an IDS that provides both hospital and physician services is thought to accept global reimbursement from public and private payers and more easily coordinate care.

"However, this concentration in the provider market may also result in increased bargaining power and higher prices," she added.

These findings are important, given the incentives public and private payor contracts offer physicians for vertical integration.

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